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The Impact of 9/11 on Canada - U.S. Trade

The Impact of 9/11 on Canada - U.S. Trade

Copyright Date: 2008
Pages: 176
  • Book Info
    The Impact of 9/11 on Canada - U.S. Trade
    Book Description:

    The events of 9/11 and subsequent border entry security initiatives have led to increased costs and transportation delays that have the potential to impact Canada-U.S. trade. Researchers have identified increased border crossing times for importers and exporters transporting goods between the two countries, but there has been little effort made to identify the quantitative importance of these developments in terms of their effect on bilateral trade flows. In this study, Steven Globerman and Paul Storer fill this gap in the existing research through statistical analysis of trade flows since 9/11.

    Among the questions undertaken in this book are whether trade flows are lower in the post-9/11 period than they should be, and whether 'special' factors apart from 9/11 might have influenced flow in major bilateral sectors. Globerman and Storer show that U.S. exports to Canada decreased significantly in the aftermath of 9/11, though such exports recovered by 2004. In contrast, while U.S. imports from Canada also suffered a significant post-9/11 decrease, a shortfall between actual and expected imports from Canada persisted through 2005. In other words, by mid-2005, Canadian exports to the U.S. had not regained their 'normal level.' These and other conclusions are crucial to understanding the impact that increased border security has had on the economic relationship between Canada and the United States.

    eISBN: 978-1-4426-8830-8
    Subjects: Business

Table of Contents

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  1. Front Matter
    (pp. i-vi)
  2. Table of Contents
    (pp. vii-viii)
  3. Preface
    (pp. ix-2)
  4. 1 Introduction
    (pp. 3-14)

    At 8:47 a.m. on 11 September 2001, American Airlines Flight 11 crashed into the north side of the North Tower of the World Trade Center in New York City after it was hijacked by terrorists. At 9:03 a.m. local time, United Airlines Flight 175 crashed into the South Tower of the World Trade Center. At around 9:38 a.m., a third hijacked airplane, American Airlines Flight 77, smashed into the Pentagon in Washington, D.C. A fourth hijacked aircraft crashed in a field in Somerset County, Pennsylvania, at 10:03 a.m. after a group of passengers attempted by force to regain control of...

  5. 2 Security Policy and the Canada—U.S. Border
    (pp. 15-24)

    The path traced by the Canada–U.S. border is a product of history and politics that sometimes respects geographic realities but at others seems to ignore them. Whether the border is created by the St Lawrence River or by something as arbitrary as the 49th parallel, its existence has much the same implications for the flow of goods and people between Canada and the United States. For both countries, the border represents an access point to its largest trade partner, as well as to world trade more broadly since some foreign goods entering either country are transshipped to the other...

  6. 3 Overview of Canada—U.S. Trade in Goods
    (pp. 25-31)

    As noted in the previous chapter, the primary focus of this study is on identifying and evaluating the impact of post-9/11 security developments on bilateral trade. In this regard, it would seem that some basic information about Canada–U.S. merchandise trade would be useful background for the reader.

    Trade between the United States and Canada is the largest bilateral trading relationship in the world. While the importance of the United States as a trading partner is well known to Canadians, the importance of Canada as a trading partner is often unappreciated in the United States. Yet while increasing public and...

  7. 4 The Impacts of Border Security — Review of the Literature
    (pp. 32-43)

    It was quickly recognized that security-related disruptions to bilateral trade were severe in the immediate aftermath of 9/11. It is much less clear whether the significant trade-related impacts of 9/11 have persisted or whether the bilateral trade regime is essentially back to the status quo prior to 9/11. Indeed, to our knowledge, there has been virtually no published research focusing directly on the impact that 9/11 may have had on bilateral trade following the tragedy. Rather, most evaluations of 9/11 have focused on the consequences of borderrelated security disruptions on the operations and costs of shippers and manufacturers. The presumption...

  8. 5 Study Methodology
    (pp. 44-54)

    In this chapter we discuss conceptual and pedagogical issues surrounding the specification and estimation of a model of bilateral trade between Canada and the United States. We have chosen to identify the impacts of 9/11 on bilateral trade through an estimated model of bilateral trade spanning a time period before and after the 9/11 attack. Specifically, we specify and estimate separate equations for goods crossing the border from the United States to Canada and from Canada to the United States over the period extending from the first quarter of 1996 or 1997 through the second quarter of 2005.¹ The estimation...

  9. 6 The Aggregate Export and Import Equations
    (pp. 55-64)

    In this chapter we identify statistically a parsimonious specification of bilateral trade equations, which we then use to evaluate the impact of 9/11 on bilateral trade. The equation is initially ‘calibrated’ using data for the pre-9/11 period. The goal is to identify relatively simple U.S. export and import equations that are statistically reliable and then to incorporate time-period variables that allow the regression intercepts to differ between the pre- and post-9/11 periods. The estimated values of the time-period binary variables identify whether and how the bilateral trade relationship in the post- 9/11 period differs from the relationship in the pre-9/11...

  10. 7 Estimating Export and Import Equations at the Port Level
    (pp. 65-71)

    As mentioned earlier, an important focus of our study is to identify whether there are significant differences across major land ports in terms of the impacts of post-9/11 developments on bilateral trade. The identification of any such differences would obviously raise important questions about the reason(s) for the observed differences. It might also point towards policy initiatives that could help ‘less successful’ ports improve their performance with respect to processing commercial shipments.

    Our approach towards identifying port-level differences in their post-9/11 experiences is to replicate the methodology implemented for aggregate exports and imports at the level of each of the...

  11. 8 Interpreting the Estimated Impacts on Overall Bilateral Trade
    (pp. 72-83)

    In the preceding chapter we provided estimates of the ‘shortfall’ over time in U.S. trade with Canada that we attributed to security-related measures undertaken in the post-9/11 period. While the shortfalls for U.S. exports to Canada essentially disappeared by the middle of 2005, they persisted for U.S. imports from Canada. Moreover, the shortfalls in Canadian exports to the United States are relatively large, both in the aggregate as well as for individual border crossings. Indeed, our results suggest adverse impacts for Canadian exports that are much more serious than have been suggested by other studies, to date. It is, therefore,...

  12. 9 Interpreting the Estimated Impacts at Individual Ports
    (pp. 84-88)

    In chapter 7 we identified differences in estimated trade shortfalls across main surface ports in the United States. These differences have potentially significant policy implications. In particular, they suggest that initiatives to improve the flow of commercial shipments, particularly shipments from Canada to the United States where aggregate trade shortfalls are most significant, might be more effective if they were concentrated on those ports where post-9/11 trade shortfalls are still persisting. In this chapter we look more closely at the estimated trade shortfalls at the individual port level, to try to assess the reliability of our findings as well as...

  13. 10 Potential Impacts on Capital Investment
    (pp. 89-99)

    The preceding two chapters presented some evidence bearing on the possibility that our statistical estimates of the impacts of 9/11 on bilateral trade flows might be overstated because they fail to adequately account for other influences on trade flows in the post-9/11 period besides those related to border security developments. The evidence suggests that any upward bias is likely to be modest and that our broad conclusions with respect to the linkage between bilateral trade and post-9/11 security developments are quite plausible.

    In this chapter we consider whether post-9/11 security developments have affected investment patterns in North America. In particular,...

  14. 11 Summary and Policy Conclusions
    (pp. 100-106)

    The main finding of interest in this study is that the disruptive impacts of post-9/11 security developments on Canada–U.S. trade did have a significant and negative impact on the growth of Canada–U.S. trade. While this impact apparently dissipated for U.S. exports to Canada by 2004, they persisted for U.S. imports from Canada, at least through the middle of 2005.

    The negative impact on Canadian exports to the United States is of obvious concern to Canadian policy makers, particularly in light of Canada’s extreme dependence on the United States as a market for its products; however, the persisting negative...

  15. Notes
    (pp. 107-114)
  16. [Maps]
    (pp. 115-126)
  17. Tables and Figures
    (pp. 127-152)
  18. Appendices
    (pp. 153-172)
  19. References
    (pp. 173-178)
  20. Index
    (pp. 179-187)